BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        SB 959|
          |Office of Senate Floor Analyses   |                              |
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                                UNFINISHED BUSINESS 

          Bill No:  SB 959
          Author:   Lara (D), et al.
          Amended:  8/15/16  
          Vote:     21 

           SENATE EDUCATION COMMITTEE:  7-2, 3/30/16
           AYES:  Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
           NOES:  Huff, Vidak

           AYES:  Lara, Beall, Hill, McGuire, Mendoza
           NOES:  Bates, Nielsen

           SENATE FLOOR:  24-14, 6/1/16
           AYES:  Beall, Block, Cannella, De León, Galgiani, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,  
            Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,  
            Pavley, Roth, Wieckowski
           NOES:  Anderson, Bates, Berryhill, Fuller, Gaines, Glazer,  
            Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk
           NO VOTE RECORDED:  Allen, Runner

           ASSEMBLY FLOOR:  52-25, 8/18/16 - See last page for vote

           SUBJECT:   University of California:  contracts:  bidding

          SOURCE:    Author
          DIGEST:   This bill modifies the requirements for qualifying as  
          a lowest responsible bidder or best value awardee for contracts  
          for specified types of service contracts at the University of  
          California (UC) by requiring a bidder to certify in writing that  
          its employees are compensated at a level that does not undercut,  
          by more than five percent, the average per-employee value of  


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          total compensation for UC employees who perform comparable work,  
          as specified, and beginning January 1, 2018, makes these  
          provisions applicable to any renewal or extension of an existing  
          contract for goods, materials and services involving an  
          expenditure of $100,000 or more annually.  

          Assembly Amendments delete the requirement for bidders to  
          provide the UC with specified information, including  
          spreadsheets showing all applicable compensation and benefits,  
          and also remove the notification requirements for successful  


          Existing law:

          1)Outlines the requirements and procedures for competitive  
            bidding at the UC.  Existing law outlines requirements and  
            procedures, specifically for the acquisition of materials,  
            goods and services. (Public Contract Code § 10500, et seq.)

          2)Requires the UC to let any contract involving an expenditure  
            of $100,000 or more annually for goods and materials, or for  
            services to be performed (other than personal or professional  
            services) to the lowest responsible bidder.  (PCC § 10507.7)

          3)Authorizes the UC, when it determines that it can expect  
            long-term savings, as specified, to select the lowest  
            responsible bidder on the basis of the best value to the  
            University.  (PCC §10507.8) 

          4)Declares the intent of the Legislature to facilitate the  
            participation of small businesses, particularly small  
            disadvantaged or minority business enterprises, women business  
            enterprises and disabled veteran business enterprises in  


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            business contracting with the UC.  (PCC § 10500.5)

          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          materials, goods, and services at the UC.  Specifically, this  

          1)Establishes a number of new requirements for bidders.   
            Specifically, this bill:

             a)   Requires a bidder to certify in writing to the UC that  
               the bid includes a total employee compensation package,  
               including fringe benefits, that is valued at a per-employee  
               basis that does not undercut, by more than five percent,  
               the average per-employee value of total compensation for  
               employees at the UC who perform comparable work at the  
               relevant campus, medical center, or laboratory, where the  
               proposed work will be performed. In addition, it:

               i)     Applies these requirements specifically to contracts  
                 for building maintenance, cleaning, or custodial  
                 services, call center services, dining and food services,  
                 gardening, grounds keeping and plant nursery services,  
                 laborer services, mailroom services, parking, shuttle  
                 bus, truck driving, or transportation services, security  
                 services, storekeeper services, patient care technical  
                 employee services, patient billing services, medical  
                 transcribing services, patient escort services, or  
                 nursing assistant services.

               ii)    Exempts the application of these requirements to  
                 employees who are mentally or physically handicapped, or  
                 both, who have been issued a license for employment at  
                 less than minimum wage by the Industrial Welfare  


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               iii)   Exempts public works projects conducted by public  
                 agencies from these requirements.

             b)   Requires the UC to:

               i)     Include in its request for proposals a calculation  
                 which considers the criteria outlined in 1) above.

               ii)    Use all known cost escalators in the calculation to  
                 project the future rate of growth of average per-employee  
                 total compensation costs.

             c)   Requires a bidder to certify in writing that the bidder  
               has not been found liable for violation of compensation,  
               work hours, or working conditions related provisions of the  
               Penal Code, or Labor Code, as specified, or any Wage Order  
               Issued by the Industrial Welfare Commission for specified  
               amounts, within the prior five years. 

             d)   Declares the records provided by the bidder/contractor  
               to be subject to public records act laws, as specified and  
               authorizes the UC to redact any confidential information,  
               as specified, and to delay response until after a bid  
               process is complete, if applicable. 

          2)Makes, beginning January 1, 2018, the $100,000 threshold for  
            competitive bidding of contracts for goods, materials and  
            services to be performed applicable to any renewal or  
            extension of an existing contract if it involves an  
            expenditure of $100,000 or more annually.  

          3)Makes findings and declarations that the UC has squandered  
            public resources via contracting out to for-profit private  
            contractors that charge significant administrative overhead. 


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          1)Need for the bill.  According to the author, this bill seeks  
            to address the growing challenge to California of the use of  
            contingent workers to replace employees and the consequential  
            effect it has on wages and worker protections.  This bill  
            requires the UC, when evaluating bids for contract work, to  
            evaluate the total employee compensation package and ensure  
            that it does not undercut wages and benefits of existing  
            university employees.  According to the author, the UC serves  
            as an anchor institution in the market in which it operates,  
            and as a public institution, and the third-largest California  
            employer, should adopt and promote policies that respect its  
            employees and protect workers' rights. 

          2)Related study.  According to a 2012 study by the UC Berkeley  
            Labor Center, Temporary Workers in California are Twice as  
            Likely as Non-Temps to Live in Poverty: Problems with  
            Temporary and Subcontracted Work in California, almost  
            one-quarter of a million people worked in the temporary help  
            services industry in California in 2010.  These workers were  
            slightly younger, more likely to be female, less likely to be  
            white non-Hispanic, and less likely to have a high school  
            diploma or GED than the average non-temp worker.  These  
            workers were also more susceptible to workplace illness and  
            injury, earned less than their non-temp counterparts, and were  
            less likely to get benefits.  The report notes that lowered  
            wages mean that these workers rely more on the state safety  
            net than their direct-hire counterparts and that these  
            employment arrangements undermine worker protections by  
            allowing employers to avoid certain provisions of worker  
            protection and making it difficult to enforce other  
            protections. The report also notes that these employment  
            relationships create downward pressure on wages. 

          3)UC's Fair Wage/Fair Work Plan.  In July 2015, the UC adopted a  
            Fair Wage/Fair Work Plan.  Under the Plan, the UC has  
            established a minimum level of pay for employees to ensure  


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            that all UC workers are provided a fair wage with a goal of  
            reaching a minimum wage of $15 per hour on October 1, 2017.   
            In addition, the UC reports that it is implementing annual  
            compensation audits and interim audits, paid for by the  
            contractor, to monitor wage and working conditions as well as  
            compliance with federal, state, and UC workplace laws and  
            policies for contracted employees working pursuant to  
            contracts entered into or renewed after October 2015.  The UC  
            will also establish a phone hotline and central online system  
            to report complaints directly to the Office of the President.   

            In light of the activities already planned as part of the UC's  
            Fair Wage/Fair Work Plan, is this bill necessary?

          4)Consequences?  This bill increases the complexity of the  
            bidding process for both the UC and potential bidders. It  
            would likely result in an increase in UC's costs for procuring  
            services and could potentially limit the pool of qualified  
            bidders.  The Legislature may wish to consider:

                 What would be the impact on smaller businesses  
               (particularly those which are disadvantaged or minority  
               business enterprises, women business enterprises and  
               disabled veteran business enterprises) wishing to contract  
               with the UC?

                 How would these provisions affect the efforts of the  
               University to respond to recent directives that the UC  
               minimize its administrative costs and operate more  
               efficiently in order to more cost effectively meet the  
               state's teaching and research needs?

          Prior Legislation

          This bill is substantively similar to SB 376 (Lara, 2015) which  


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          was heard and passed by the Senate Education Committee in April  
          2015, by a vote of 7-2. SB 376 was subsequently vetoed by the  
          Governor, whose message read, in pertinent part:

             "It's worth noting that the University of California recently  
            responded to criticisms of its wage and contracting practices  
            with a plan to incrementally increase its minimum wage for  
            both employees and contract workers, and a pledge to better  
            oversee contracts generally.

            The effort to provide increased compensation to those who work  
            for UC - either directly or on a contract basis - is  
            well-intentioned, but I'm not prepared to embrace the  
            provisions of this bill.

            I would caution the University, however, to provide a  
            transparent accounting of its contracts and clearly  
            demonstrate how the interests of all its lower paid workers  
            are being protected."

          It is unclear whether the new provisions of this bill respond to  
          the Governor's message. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee, UC estimates  
          that its total annual spending on service contracts of the types  
          that would be subject to the provisions of this bill is $345  
          million, with just over one half of this amount representing  
          contracts at UC's 10 campuses and the remainder representing  
          contracts at UC's five medical centers.  Of this total, an  
          estimated 60% ($207 million) constitutes labor costs.  Assuming  
          a 30% increase in costs related to providing parity in benefits  
          and a 12.5% increase in costs related to wage parity, total  
          annual costs would be $88 million.  These costs will come from a  
          variety of UC fund sources, including the State General Fund,  


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          federal funds, auxiliary funds, and enterprise funds, such as  
          funds from the medical centers.

          In addition to increased contract costs, UC will incur  
          administrative costs of several hundred thousand dollars to  
          calculate average per-employee compensation for every type of  
          contract and to factor in all known cost escalators to project  
          future per-employee costs.  There will be additional  
          administrative costs, likely in the millions of dollars over  
          time, associated with revising contract bid specifications,  
          maintaining information provided by prospective and successful  
          bidders for potential Public Records Act requests, and  
          performing additional bidding due to the bill's restrictions on  
          contract renewals or extensions 

          SUPPORT:   (Verified8/19/16)

          American Federation of State, County and Municipal Employees,  
          Local 3299
          California Federation of Teachers
          California Labor Federation
          California Teamsters Public Affairs Council
          University of California Student Association

          OPPOSITION:   (Verified8/19/16)

          Association of California Cities - Orange County
          California Chamber of Commerce
          Los Angeles Area Chamber of Commerce
          Sacramento Metropolitan Chamber of Commerce
          San Gabriel Valley Economic Partnership
          Orange County Business Council
          University of California
          USCB, America, Inc.


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                                                                    Page  9

          ASSEMBLY FLOOR:  52-25, 8/18/16
          AYES:  Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,  
            Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia,  
            Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,  
            Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low,  
            McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting,  
            Waldron, Weber, Williams, Wood, Rendon
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,  
            Jones, Lackey, Maienschein, Mathis, Mayes, Melendez,  
            Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk
          NO VOTE RECORDED:  Roger Hernández, Kim, Nazarian

          Prepared by:Lenin DelCastillo / ED. / (916) 651-4105
          8/29/16 18:45:37

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